In the year 2011 we will in all likelihood see the first company to reach a billion dollars in revenue with an open source focused model. Dan Woods over on Forbes.com has an excellent piece highlighting Red Hat as the first and probably only company in the foreseeable future to reach this truly epic milestone. According to Dan there have been only about 20 software companies or so that have reached the billion dollar revenue model. Red Hat is the first one doing it with open source. Dan then goes on to say that there is not a big enough "open source stack" for any other open source selling company to hit that mark. To me that is irrelevant. I think there are many open source companies generating a billion dollars or more of revenue by not selling open source, but by using open source!
Where would Google be without open source? No Android, No Chrome, in fact no Google servers that run the searches. Google, not Red Hat should be the poster child for printing money with open source. That is a company that is making billions of dollars in revenue on the back of open source. Google is not alone. How much of Facebook runs on open source? Twitter? What about all of the phone companies making billions using Android? Companies using Java? How much revenue is generated by web servers running Apache? While MySQL allegedly never had a revenue rate of above 50 million annually, how many companies that do more than a billion dollars a year use the MySQL database to power their business? There has got to be a few out there.
Another great example is Zynga. How many of you have heard of Zynga? They are the game company behind Farmville, Mafia Wars, Fishville, etc. While holiday shopping for my kids this past week I see they are selling Zynga gift cards in the Game Stop stores now. John Doerr of Kleiner, Perkins fame said Zynga is the most-profitable, fastest-growing, and has the happiest customers of any company that Kleiner Perkins has invested in. Just three years old, Zynga has an estimated market value above $5 billion, more than 320 million registered users, 1,300 employees and estimated revenues this year above $500 million. Zynga as I have reported on in my column before is built using open source.
Measuring the health or success of the open source software market by the revenue of companies that are using open source to make money rather than by companies selling open source software makes much more sense to me. Too many in the open source world have fixated on the lack of companies selling open source reaching a billion dollar level. The reasons there are not any yet are well laid out by Woods. But should we care?
Measuring the success of companies who use open source shows us all we need to know about the success of open source. At the end of the day that should be the real measuring stick. All of that being said though, again as Woods points out, there have only been about 20 companies that have gone past the billion dollar revenue mark. Most of them are household names. Microsoft, Oracle, SAP, etc. But there are lots and lots of companies that are very successful doing between 50 and 500 million dollars a year in revenue too.
As an entrepreneur who has started several companies, boot strapped and VC backed, have also gone through an IPO and had my share of failures, a company doing a 100 million dollars a year in revenue is nothing to sneeze at. That is a sizable operation and should be considered a success by anyone's analysis. So are some in the open source community putting an unfair and unrealistic burden on the definition of success for open source companies? I think so.
There is only one Red Hat. Just like there is only one Linux. But as we move away from a PC centric world to a mobile/cloud based future, there may be other open source platforms and companies that sell open source that approach a billion dollars in revenue. But whether they do or not, should not have anything to do with measuring the success of open source.